Blurring the lines between work and retirement

It wasn’t that long ago that retirement was something that occurred to everyone at a certain age, typically 65. That was when you basically had to retire from your job, and that magic age was – not surprisingly – the same age where government and company pension benefits were designed to start.

But things these days are much different, writes Jim Wilson in Canadian HR Reporter. The lines between the workforce and the retiree population are blurring, and it may be retirees who have to pick up the slack in the labour market.

The problem, he writes, is the “Great Resignation,” where employees are “changing their jobs or careers amid the upheaval of the pandemic.” Retirees, he explains – as well as the semi-retired – may need to be tapped to take on those unfilled jobs.

He cites a recent survey by Express Employment Professionals that found 79 per cent of respondents wanting “to partake in semi-retirement by having a flexible work schedule,” or by being a consultant (62 per cent) or “working reduced hours with reduced benefits” (52 per cent).

That’s a big difference from the old days, when retirements occurred at a fixed date, Express spokesperson Hanif Hemani tells Canadian HR Reporter.

“There’s also been a bit of an attitudinal change amongst baby boomers that are retiring where they want a little bit more out of life; they feel like they still have a few good years to offer. And so this concept of semi-retirement is basically bridging these individuals from their traditional work and phasing them into retirement, rather than having a set end date when they’ll be gone,” Hemani states in the article.

Another interesting finding the story mentions is that 18 per cent of workers over 50 (this number comes from RBC) want to “push out their retirement date.” But, the article adds, only 22 per cent of employees say their employer even offers the option of semi-retirement.

So without a lot of formal “semi-retirement” programs in the workplace, the article notes, employers are doing things like “bringing retired employees back, either to be a knowledge expert (21 per cent), act as a mentor to current employees (16 per cent) or handle key client relationships (14 per cent).

The article concludes by suggesting employees have a chat with older employees – maybe two years before they plan to retire – to see what “retirement looks like” for them. Could it include part time post-retirement work, or consulting?

The idea of “phased retirement” is something that has been kicked around in the pension industry for years. The concept was fairly simple to explain – you might work 80 per cent of your previous hours and draw part of your pension (20 per cent) at the same time. Then, in a few years, maybe you move to 50-50, and then to 20 per cent work and 80 per cent retirement, and finally, full retirement.

The concept sounds simple but it would be an administrative headache for any pension plan. As well, you would probably need to have government pensions permit the same thing, and maybe registered retirement savings plans as well. A lot of legislation and administrative work. But perhaps the old idea needs to be dusted off and looked at with fresh eyes, given the new realities of 2022.

If you have been saving on your own for retirement, there’s a great program out there that’s been designed with people like you in mind. The Saskatchewan Pension Plan is an open defined contribution pension plan that individuals can join. Once you’re a member, you decide how much you want to contribute, and SPP handles the tricky parts of investing, and turning the investments into retirement income. Check them out today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Many of us spend a lot of time thinking about what we should do with our finances in order to set ourselves up for retirement. However, we spend so much time thinking about what we need to do to get there, we often forget that all our hard work and sacrifice needs to be protected after we are gone. The impact of the various strains of the COVID pandemic can serve as a reminder that our health is not to be taken for granted. A Government of Canada Survey in 2019, reported a disturbing pattern that has been consistent fact that almost half (45%) of Canadians don’t even have a will. 

Protecting your assets after you are not in a position to control them is essentially Estate planning. The goal of estate planning is to achieve the state of financial affairs at your death or later in your life when you wish to transfer family property to others. Similar to your financial plan, your estate plan should not be something you do once, then file away. It should be treated like a living, breathing bodyguard that may be called into action to protect your financial affairs if need be. As a result, you should maintain an on-going relationship and revisit it at least every 5 years, or more often, depending on various changes happening in your life.

A Last Will and Testament is an important part of your estate plan kind of like a bodyguard to your financial affairs after your death. A will is the badge that gives it authority and jurisdiction to dictate how your assets and property should be handled. Your will’s primary function is to specify to whom and when your assets are to be distributed.  You may want to leave specific properties (e.g. jewelry, furniture, car or shares in your business) to specific beneficiaries. In your will it should be indicated that you have designated one or more persons as your executor(s) (also called estate trustee(s)). The person should be someone you can trust to take charge of your affairs and distribute your assets in accordance with your desires as set out in your will. They should be able to act as a good member within the security team and follow the instructions of your will. The executor and estate trustee will normally apply to the court for “letters probate”, which will give court approval for then executor to take over your property, manage it and distribute it to your beneficiaries.  Probate can become very costly and at SPP we strongly recommend that you designate a beneficiary to your plan, as it can help.

If you do not make a will provincial law will determine how your assets are distributed. The result can vary significantly, depending on where you reside at the time of death. We have spent a lot of time in doors during this pandemic, isolated, worrying about our health and what life will look like in the future. Estate planning helps you maintain some control on the future and how you want it to be even if you are not here to see it.

Why some retirees are happier than others

Writing in the National Post, noted financial author Christine Ibbotson offers up some ideas on why some retirees are happier than others.

She begins by asking – from the point of view of someone still working – how one might think all retirees are happy. “They don’t work or commute any more. They have no deadlines, commitments, angry bosses, or backstabbing coworkers to deal with, and they can sleep in every day,” she writes.

(On that last point, Save with SPP will add a qualifier – unless they have dogs!)

Ibbotson writes that research has found that some retirees are happier than others. And money – or at least, management of it – seems to factor into the happiness equation, she adds.

“When we looked at the financial aspects of the happiest retirees, it was not that they had more money, but more that they viewed their money as a tool for their happiness. The happier retirees had no mortgage or consumer debt. They also stayed in the homes that they purchased and paid off while they were working,” writes Ibbotson.

On the idea of staying in their original home, Ibbotson adds “many retirees who moved during the early years of retirement to ‘right size’ their life, took on home renovations, or made big purchase decisions and wound up with more debt than they bargained for; forcing them to eat into their retirement savings or carry a new mortgage that wasn’t anticipated.”

Other findings – happier retirees had “two or three” vacations a year, while the less happy had one or less, Ibbotson writes. The happy had made use of financial planners and had “three to five” sources of income funding their retirements. The happiest had multiple hobbies – “four to seven,” versus the less happy, who had “fewer than three.”

Another noteworthy discovery was that the happiest retirees were not necessarily the ones “with the most toys,” as us boomers were led to believe in the 1980s.

“Turns out the happiest retirees in the survey were not lavish spenders and seemed to be right in the middle-class with their spending especially on cars, clothing, and vacations. The unhappy retirees on the other hand were the opposite. This group had a lot more status symbol purchases and high-priced vehicles, with BMW being the most popular,” she observes.

Ibbotson sums the research up very nicely.

“Only you can make yourself happy, healthy, fit, slim, busy, wealthy, content, independent, prosperous … you get the idea,” she writes.

“So, no matter where you are, no matter what is going on right now in your life, change it and mix it up this year. Find your own happiness equation and just do it.”

Multiple income streams in retirement is a big plus, and the Saskatchewan Pension Plan can help with that. If you have a pension plan or retirement arrangement at work, that’s a big plus for you – but if not, the SPP has everything you need to create that extra income stream. They’ll take your contributions, invest them prudently and grow them, and will provide you with that extra income that helps bankroll your hobbies or vacations once work is an afterthought.

Check them out today!

Join the Wealthcare Revolution – follow SPP on Facebook!

It’s inevitable that at the start of any new year, we sit back and make a mental list of things we can do to make our lives better.

Save with SPP had a look around to see what people are thinking about doing, resolution-wise, in 2022, excluding financial resolutions which we covered off in another post.

The Mirror notes that 46 per cent of U.K. men, and 51 per cent of the country’s women, have made a pledge to get fit in 2022. The newspaper suggests that eating “five fruit and veg a day,” as well as trying three new activities and cutting back on alcohol can help fitness goals.

Other top picks across the pond for resolutions were to be happy and to “stop being so hard on yourself,” The Mirror reports.

Closer to home, the Burnaby News offers up some environmental resolutions. “Learn something new about nature “and how to reduce harm to the environment and yourself,” the paper advises. Other tips – “spend more time with family and friends in nature,” and speaking up to help “promote environmental protection and social justice,” will help you and the world you live in, the News suggests.

Global News reports that a top resolution for Albertans is learning a musical instrument. “Music is really cool because it’s so multi-faceted,” James Zeck of the Lethbridge Music Academy tells Global News. “It’s a great way to sort of (intellectually) keep things fresh, it’s really good for your mind and your brain, but it’s also a great way to learn… personal accountability and diligence.”

Other top resolutions cited in the Global News story include “quitting smoking, getting finances in order… (and) spending more time with family.”

The Huffington Post, via Yahoo!, offers up some more, all framed in the suggestion that rather than focusing on resolutions to lose weight, resolutions should focus on steps to get you there.

These healthy resolution ideas include “stop assigning a moral value to your food,” as well as “move your body,” and “habit stacking.”

The food-focused resolution basically means that you shouldn’t beat yourself up if you slipped up and ordered a triple cheeseburger and a milkshake. But, the article points out, foods are not good or bad, and if you assign such moral values to food, you risk “conflating what you put in your mouth with your value as a person.”

“Habit stacking” refers to identifying good habits you have — and doing them more often.

“For example, you might decide to “meditate for just one minute while brewing your coffee,” the article states. “Do that until it becomes a daily habit, then you can stack on another one.”

Finally, the CTV tells us to not lose sight of the fact that any resolution is a directional hope rather than some sort of legalistic/moral contract.

“Resolutions help if we see them correctly,” Dr. Ganz Ferrance tells CTV. “If we see them as things we must hit otherwise we are failures, then they’re not. They’re just another tool for us to beat ourselves up with.”

So, putting this all together – if you set resolutions for 2022, pick things that are achievable steps to larger goals, rather than the harder-to-achieve large goals themselves. That way, your resolutions will lead to personal progress. As they stay, every long voyage begins with the first step.

A good example of “habit stacking” might be making contributions to your Saskatchewan Pension Plan account. If you are making the occasional contribution to your own retirement security, that’s great – but why not do it a little more often? Small amounts contributed today will add up to a bigger income when your future hands you your parking pass and makes that final commute home. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Offering a retirement program benefits employers as well as workers: study

Research carried out by the Healthcare of Ontario Pension Plan (HOOPP) and retirement benefits organization Common Wealth has found that offering a pension program for employees offers positive benefits for employers as well, reports Wealth Professional.

The study, titled The Business Case for Good Workplace Retirement Plans, notes that a good workplace pension plan should offer “value drivers” such as “regular automatic savings, lower fees and costs, investment discipline, fiduciary governance, and risk pooling,” the article, written by Leo Almazora, notes. As well, portability – the ability to keep the retirement program even if you change jobs – was seen as a positive feature, the article adds.

Common Wealth’s Alex Mazer states in the article that “having a plan that lets workers keep benefitting from the first five value drivers over the course of their career, even as they go from job to job and into retirement, can translate into hundreds of thousands of dollars in additional wealth accumulated over their lifetime, compared with saving for retirement on one’s own.”

Alex Mazer spoke to Save with SPP a few years ago about ways to encourage more retirement saving, and to make it automatic.

What’s interesting, the article notes, is that employers offering such programs also benefit.

“From an employer’s perspective, being able to offer a good workplace retirement plan is also a powerful tool. According to the research, having a vehicle to help them progress toward retirement is highly prized by employees, as it consistently emerged among the top benefits for recruitment or retention. Beyond that, it can also contribute greatly to improving productivity on the job,” the article reports.

“There’s a real linkage between people’s financial stress and their productivity,” Steven McCormick, senior vice president for Plan Operations at HOOPP, tells Wealth Professional. “In the research we’ve done, three quarters of employers said that any financial stress on an employee has an impact on productivity overall. I think that really makes the case for business owners to see workplace plans as an investment in their business as well as their people.”

Some business owners may see offering a pension plan as just another big expense, but McCormick says there’s a different way to look at it.

“For business owners who may have preconceived notions about the impact of putting a retirement plan in place, we’d suggest they should perhaps take another look,” McCormick states in the article. “They might not have a plan that hits all our five value drivers right off the bat, but we think it’s something to consider building toward to help their staff, their business, and society as a whole.”

This is a great look at an important issue. Let’s not overlook the fact that without a workplace pension plan, the responsibility for retirement saving becomes an individual burden. As well, those without sufficient savings for retirement may find themselves living on the spartan monthly income provided by the Canada Pension Plan, Old Age Security, and – if applicable – the Guaranteed Income Supplement.

Did you know that the Saskatchewan Pension Plan can be leveraged as a company pension plan? Contact us to find out how your company can offer SPP to its employees.

And, if you don’t have a pension program at work, perhaps the SPP can do the job for you. With SPP you get the benefit of low investment costs and pooling, and good governance. You can arrange to make regular, automatic contributions and SPP travels with you if you change jobs. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

The start of a new year often has us thinking of things we “resolve” to do – changes we want to make – in 2022.

Save with SPP had a look around the “information highway” to see what people are resolving to do on the all-important savings front.

From The Guardian , ideas include getting debt-free, starting a rainy day fund, and to “have a goal” for savings. The newspaper notes that debt is a real barrier to savings.

“There is no point trying to save if you are burdened by costly debts,” The Guardian reports. While savings accounts in the U.K. pay only about 0.2 per cent interest, the article continues, credit card, store card or overdraft debts may be “in excess of 20 per cent.”

Writing for the GoBankingRates blog via Yahoo!, John Csiszar suggests resolutions should include “bumping up your retirement plan contributions by one per cent,” reviewing your spending from 2021, and that you “don’t buy anything until you get rid of something else.”

Increasing your contributions to a retirement account (here in Canada, this might refer to a Registered Retirement Savings Plan (RRSP), or your Saskatchewan Pension Plan account) by one per cent is, Csiszar writes, an achievable goal. If you earn $50,000 a year, and are contributing five per cent to a retirement plan, he writes, bumping that up by one per cent will boost your retirement savings by $41.67 per month.

Back in the U.K., The Express recommends dropping costly habits, “start counting the pennies” (or nickels here in Canada), and following the 50/30/20 rule.

“Allocate 50 per cent for essentials, such as rent, mortgage and bills, 30 per cent for `wants’ such as hobbies, shopping or subscriptions, and 20 per cent for paying off debt or building up savings,” the article suggests.

Finally, MSN Money adds a few more – review your retirement plan contributions (to ensure you are contributing as much as you can), contribute to both “traditional” retirement savings accounts (here in Canada, an RRSP or SPP) as well as tax-free savings vehicles (for Canadians, the Tax-Free Savings Account) and increase any automatic savings you have going.

These are all great strategies. Another one to add is to live within your means. Don’t spend even a nickel more than you earn, because that overspending can snowball on you. Pay the bills, then pay yourself (and your future self), and spend what’s left over. As the bills go down, you’ll have more to save.

And the SPP allows you to make contributions the easy way – automatically. You can set up a pre-authorized payment plan with SPP and have your contributions withdrawn painlessly every payday. It’s easier to spread your contributions out throughout the year in bite-sized pieces than to try and come up with one big payment at the deadline. And the good folks at SPP will invest your contributions steadily and professionally, turning them into future retirement income. It’s win win!

Join the Wealthcare Revolution – follow SPP on Facebook!

New year, new plan to fix your finances?

Writing for the GoBankingRates blog via Yahoo! Finance, Jennifer Taylor suggests that the start of 2022 is a great time to review your personal finances.

“The new year is here and you’re ready to make serious changes to your financial situation,” she writes. “Whether you’re buried in credit card debt, haven’t started saving for retirement or don’t currently have an emergency fund, you’re committed to turning things around in 2022,” the article continues.

She raises an interesting idea, courtesy of Ryan Klippel of Optas Capital – that your budget for this year should be focused on whether or not “you were cash flow positive or negative last year.”

If you were cash flow positive – meaning you had money left over after meeting all your obligations – “great, now set a savings goal for 2022” for the extra money, the article suggests.

If, on the other hand, you were cash flow negative – meaning you have more obligations than money – “spend the time to determine what expenses were luxuries versus necessities, and trim accordingly,” the article notes.

For those of us with debts to address, states Klippel in the article, “sometimes setting smaller goals to start is better than overly ambitious ones. For example, it is much more realistic and digestible to eliminate credit card debt for one card than five.”

The rest of the article offers tips on how to turn your personal financial ship of state around.

• Save more money: Even if you could save just 10 per cent of your salary per month – leaving you 90 per cent to spend – you’d have a full year’s salary in the bank after 10 years, the article suggests.
• Retirement savings: Pay your future self first, the article suggests, and make retirement savings a priority, even over saving for kids’ education. Often, people want to do more things in retirement than they have done in their working lives, so more retirement income is positive, the article adds.
• Don’t let money control your life: It’s easy to get into the cycle of living paycheque to paycheque, but the article advises that “gratification comes when you take control of your life and the power you get when you wake up and realize you have money in the bank.”

Other great ideas suggested in the article include building up your emergency fund, changing your spending habits (via reflecting on how you spend and having a plan to change your ways), and paying your credit card in full each month.

This last one is particularly good advice. There are a lot of us who can’t pay off credit card balances. That basically means we are “buying” things that we won’t pay for in full for years, all while getting charged double digit interest. Often, one ends up in a “pay the bank first” scenario, due to rising minimum payments on credit card balances. Turning this around so that you pay the thing off in full will mean you can bid a fond farewell to all that compounding interest – and create a new pool of cash that you can put away for your future retirement years.

As we start a new year, your financial planning should for sure focus on retirement savings. The Saskatchewan Pension Plan equips you with a do-it-yourself, end to end retirement system that takes your contributions, invests them, and turns that nest egg into future retirement income. You can even get a lifetime pension through SPP’s family of annuity options. Find out how SPP can help you pre-build a secure retirement!

Join the Wealthcare Revolution – follow SPP on Facebook!

Are you in the market for a mortgage and you’re not sure which one to take out? In this article we’ll look at the difference between collateral and conventional mortgages, so you can decide which one is the right one for you.

Collateral Mortgages

A collateral mortgage lets you borrow more money than your property is worth. A mortgage lender is able to do that because a collateral mortgage re-advances. This allows you to borrow additional funds as needed without needing your break your existing mortgage contract.

This is accomplished by registering a lien against your property. Lenders will register a lien for up to 125% of your property’s value. For example, if your home is valued at $700,000, you could register a lien for a maximum of $875,000.

When the charge is registered, you can leverage the equity as needed. The simplest way to do that is by setting up a Home Equity Line of Credit (HELOC). HELOCs are a lot like mortgages. HELOCs offer a way to borrow money cheaply, but with even more flexible repayment terms. With a HELOC you’re able to make interest-only payments on your mortgage to minimize your cash flow.

You could also set up a readvanceable mortgage whereby the credit limit on the HELOC increases as you pay down your mortgage. You could use the extra equity to finance home renovations or to buy your next investment property.

Conventional Mortgages

A conventional mortgage is the mortgage you probably already know. When you put down at least 20% on a property, you’re eligible for a conventional mortgage. This is different than an insured mortgage when you put down less than 20% on a property.

Since you are putting down at least 20% on the property, you’re able to borrow at least 80% of its value with a conventional mortgage. The value of your property is based on how much it’s appraised for.

If it’s appraised for more than you paid, you can borrow based on the purchase price. However, if it’s appraised for less, you can only borrow based on the appraised value and you have to make up the rest from your own pockets if you want to still put at least 20% down.

If cash flow matters most to you, the 30 year amortization makes the most sense. Otherwise, if rate matters the most, the 25 year amortization is usually the way to go.

This post was written by Sean Cooper, bestselling author of the book, Burn Your Mortgage. Sean is also a mortgage broker at mortgagepal.ca.

Are Brits drawing down their pension savings at too great a clip?

One of the tricky parts to living off a lump sum of retirement savings is figuring out how much to take out each year.

There are many theories on what the “right” percentage to draw down is, and many experts, such as Dr. John Por who spoke to Save with SPP last year say a perfectly correct number is “unknowable,” since no one knows what future interest rates and markets will be like.

But the general rule of thumb has been that taking out four per cent per year is a “sustainable” number.

That’s why it is surprising to read the news in Professional Pensions that across the pond, 43 per cent of Brits are withdrawing eight per cent of their retirement savings annually – double that rule of thumb.

The figure comes from new research from the Financial Conduct Authority (FCA) in the U.K.

“While you may need to make occasional ad-hoc withdrawals to cover large expenses, making regular withdrawals at this level risks depleting your fund,” states senior pension analyst Helen Morrissey of Hargreaves Lansdown. “If you also experience a period of investment volatility this can further impact your fund as you have no… contributions going in to make up any losses,” she states.

The number of Brits withdrawing at an eight per cent clip jumped from 40 per cent in 2020 to 43 per cent this year.

The article suggests that the pandemic has played a part in people taking more out of their pension savings.

Meanwhile, data from the FCA shows there has been a 13 per cent drop in annuity purchases in the U.K.

This may be, reports The Telegraph because of “a deterioration in annuity rates” thanks to generally low interest rates, and the fact that drawdown “will always give you the highest income” versus an annuity.

The Telegraph article says only an annuity approach guarantees that you won’t “exhaust your pension early.” They suggest a blend of the two options – drawing down some of your money at a sustainable rate, and annuitizing the rest, to ensure that you will never run out.

Save with SPP knows of at least a couple of people who ran out of retirement savings while still relatively young. It’s likely that they didn’t understand the idea that the big pot of savings is supposed to last as long as you do. It’s tempting to be sitting on maybe a hundred thousand dollars of savings, and thinking that it’s time for new windows and doors, or (one day) a vacation, and burning through it. But you’ll miss that money when you’re 90.

The Saskatchewan Pension Plan (www.saskpension.com) allows you to annuitize some or all of your retirement savings when the day comes to put down the shovel and stop working. The SPP’s Retirement Guide outlines all the annuity options you can choose from. And if you have a spouse, the annuity option means that your spouse will receive a lifetime income from SPP should you pass away before they do. That’s the peace of mind that saving for retirement with SPP can bring. Check them out today.

Join the Wealthcare Revolution – follow SPP on Facebook!